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The mysterious $15-billion financing agency at the centre of Ottawa’s clean-economy ambitions is ready to step out of the shadows.

Since being announced in the 2022 federal budget, the Canada Growth Fund has been a subject of great speculation and confusion, even among insiders in the clean-tech sectors the fund was tasked with helping to grow, and the heavy industries that it was charged with helping to decarbonize.

But behind the scenes, since the CGF was entrusted earlier this year to the public sector pension fund manager PSP Investments, it has been quickly ramping up.

Sitting down for his first interview since being named the CGF’s chief executive officer this summer, veteran PSP executive Patrick Charbonneau came armed with facts and figures to prove its progress. So far, he said, more than 60 potential investments are in the fund’s pipeline, and about 20 have been prioritized. A handful, which he would not specify, are advanced enough that the CGF will start announcing them soon.

That makes for a pivotal period in the coming weeks that Mr. Charbonneau is counting on to clear up the ambiguity around the CGF and prove its credibility.

“There’s nothing better than a deal to explain what you’re trying to achieve,” he said. “It’s much easier to get a deal done, explain that deal, get another one done …”

What he and his fledgling team are trying to achieve is not easy. They will deploy an unusual combination of concessional financial instruments that the government initially outlined rather vaguely – equity, debt, contracts for difference and offtake agreements – to de-risk investments for the private sector. But the CGF must also earn enough returns to remain capitalized at around $15-billion. And there is a great deal riding on getting things right.

Canada’s international competitiveness during the transition to a low-carbon economy, including keeping pace with the United States as it spends hundreds of billions of dollars through the Inflation Reduction Act, rests heavily on whether the CGF builds momentum and unlocks private capital the way Mr. Charbonneau envisions. So, too, does the ability to meet national emissions-reduction commitments.

The government’s and PSP’s credibility are also both at stake as they implement a unique financing model that has already attracted international attention, with Britain reportedly considering an imitation of it, but that could be cast as a boondoggle if it doesn’t pan out.

Over the course of a lengthy conversation in PSP’s Montreal boardroom, Mr. Charbonneau pulled back the curtain on the CGF – organizationally and in how it’s interpreting its mandate – as it readies for the spotlight.

On the operational side, a team of 14 investors with diverse expertise – including in energy and infrastructure, private equity, impact investment and structuring complex transactions – has been assembled from within PSP, he said. He himself most recently served as PSP’s global head of infrastructure investments, based in London.

The investors are walled off from the rest of PSP, he said, although the CGF relies on other existing resources such as administrative staff. That helped the CGF to stand up quickly, which is among the reasons – alongside a strong investing reputation and experience operating at arms length – why Ottawa parked the CGF with PSP rather than building something totally new.

As of now, about two-thirds of the 60 investments under consideration would involve backing for major industrial decarbonization projects, such as carbon capture. The other third would be investments in Canadian clean-tech companies trying to scale up.

The CGF has not started to advance a third investment target that it’s supposed to pursue – in supply chains, such as mining projects for battery materials. Mr. Charbonneau said that’s so the fund doesn’t try to do too much too quickly.

Some early deals might be relatively small, as the CGF tries to get a feel for the tools at its disposal. But the aim, Mr. Charbonneau said, is to get the full $15-billion invested in five years. That’s an ambitious timeline that would contrast sharply with other government-funded investment bodies, such as the Canada Infrastructure Bank, which were much slower to get rolling.

Based on continuing conversations with people in some of the industries the CGF is supposed to help, many of whom were only a couple of months ago expressing skepticism about whether the fund is positioned to be useful, the recent push has started to positively shape perceptions.

“They’re listening and they’ve demonstrated to us that they’re working to get deals done,” said Sarah Petrevan, vice-president for sustainability with the Cement Association of Canada. One of its members, German multinational Heidelberg Materials, has been in advanced discussions with the CGF about backing for a major carbon-capture project in Edmonton.

The potential structure and mix of deals is also starting to take shape, although a lot of open questions remain.

So far, much of the chatter has revolved around de-risking investments in industrial decarbonization that only make financial sense for companies if they generate tradeable, high-value carbon credits under Canada’s industrial carbon-pricing regime. That’s not a sure thing, given uncertainty about how markets for the credits will take shape, and whether the system will survive changes in government.

The industry expectation has been that the CGF will address that need through carbon contracts for difference (CCfDs), a novel tool which would effectively guarantee value for each abated tonne of emissions, and make up the difference if credits trade for less than that (or earn a return if the credit value proves higher). Mr. Charbonneau said the CGF is now also looking at a variation, in the form of offtake agreements, which would essentially involve it buying the carbon credits in advance and getting into the credit-trading market itself.

Backing up the credits is a controversial concept among environmental groups because they would be used heavily by carbon-capture projects, including potentially within the oil and gas sector.

Mr. Charbonneau said, however, that the biggest potential carbon-capture projects in the fossil fuel industry are not currently part of the mix, because they’re so big that the projects could consume much of the CGF’s budget. “We’re not targeting Pathways,” he said, referring to an alliance of the six largest companies in Alberta’s oil sands.

That doesn’t mean those companies couldn’t be in line for CCfDs or offtakes a different way. Ottawa has hinted that after the CGF does initial deals with other sectors – such as cement, steel or electricity generation – it will use them as a model for a broader program that lives elsewhere on its books.

That adds to pressure on the CGF to prove these deals are worth replicating, which means prioritizing projects that require the lowest credit value to be viable, and can move forward relatively quickly.

It’s a different dynamic with the CGF’s concurrent efforts to back small clean-tech companies.

The concept is to mostly use equity or debt to help early-stage proprietors overcome a risk-averse Canadian investment culture that makes it hard to take unproven products to market, despite strong government support for research and development.

“Basically, they have some capital but they’re not able to close their round,” said Mr. Charbonneau, referring to the oft-cited valley of death around commercialization. “That’s where we should come in.”

It’s a need that has become even more pronounced since Sustainable Development and Technology Canada – a smaller government agency that supports things such as demonstration projects – recently had its funding powers suspended over concerns about mismanagement.

The good news, Mr. Charbonneau said, is that the comparatively modest dollar figures sought by small clean-tech companies means the CGF will be able to support a wide range of them, even though that will consume a lesser share of its total budget than industrial decarbonization.

“The market is relatively small in Canada, so we don’t need to pick the sectors right now, as long they fit within the mandate,” he said. Currently, the clean-tech projects in its pipeline involve everything from electrification to biofuels to battery recycling to agricultural technologies.

But that doesn’t mean picking and choosing which early-stage companies to back will be easy. And, in fact, it speaks to one of the CGF’s fundamental challenges in the early going.

The fund’s mandate necessitates that it only make investments that the market doesn’t support sufficiently because they’re too risky for private or institutional investors. That means a dramatic lens shift by a team of people who, only months ago, were making decisions based on the criteria of PSP, which has built its net assets to more than $240-billion by placing greater emphasis on returns, mostly through investments outside Canada.

Mr. Charbonneau downplayed the difficulty of that change in mentality. “What you will find with investors is, they take the tools that they have and get things done,” he said. “These are all the risks that we’re used to assessing anyway. Just, your appetite for it changes.”

He was less dismissive of the danger that higher risk tolerance could cause the CGF to wear some failures by companies it backs, and the need to condition public expectations.

The idea is that there will be enough successes to balance those out and pull even. “We’re not immune to having some investment that will not return the capital, but on the portfolio basis that’s the objective,” he said, acknowledging with a laugh that every investment manager would prefer to be judged portfolio-wide.

But first, before being judged much by the public, the CGF will have to go through continuing self-evaluation as to whether it’s on pace to meet the many facets of its mandate.

Mr. Charbonneau came back, again, to the merits of starting to get actual deals out the door.

“The first billion will be the hardest,” he said. “At that point, I’ll have a view if we’re on target.”